Former cycling team owner Tinkov pays $674 million after tax fraud conviction

Oleg Tinkov, founder of Tinkoff Bank, through which he sponsored the Tinkoff professional cycling team from 2012 to 2016, has admitted to concealing more than US$1 billion in assets when renouncing his U.S. Citizenship. He will pay more than a US$500 million (AU$665m) penalty.

Oleg Tinkov celebrates Alberto Contador's Giro d'Italia win with the Tinkoff-Saxo team in May Source: Getty Images

The founder of the Russian bank and cycling benefactor pleaded guilty today to filing a materially false tax return and expatriation form. He has had to pay a sum of US$506,828,377 (AU$674,680,000) with an additional US$250,000 (AU$332,800) fine, the maximum penalty under the statute, with a one-year jail term, which has been served already with his detention through his arrest. 

The back taxes with interest came to a huge amount after the bank founder sold off part of his stake in Tinkoff Bank during the bank's floating on the US Stock Exchange. Tinkoff gave up his citizenship a few days after the transaction and lied on the expatriation form, as well as on subsequent tax filings.

At the same time, he was cutting an eccentric figure as the primary sponsor and owner of the various forms of the Tinkoff team, at times riding with the squad and its stars Peter Sagan and Alberto Contador at training camps, and being vocal in the media during the season. 

Tinkoff was arrested in the United Kingdom and fought extradition to the UK, claiming health problems, with the proceedings resolving in favour of the US government. Tinkov entered a plea agreement and was sentenced on October 29.

“In 2013, when the value of Oleg Tinkov’s investment in his bank’s stock rose to over a billion dollars, Tinkov quickly renounced his U.S. citizenship and then lied to the IRS in a ploy to evade ‘exit taxes’ he knew were due,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the US Justice Department’s Tax Division.

“Today, Tinkov has entered a plea to a felony and agreed to pay more than $500 million in taxes, interest and penalties, more than double the amount of money he sought to escape paying to the U.S. Treasury through his fraudulent scheme.”

Look at me, look at me: Oleg Tinkov always wants to be the center of attention. Source: Getty

According to the plea agreement, Oleg Tinkov, also known as Oleg Tinkoff (which is the name the bank trades under), was born in Russia and became a naturalised United States citizen in 1996. From that time through 2013, he filed U.S. tax returns. In late 2005 or 2006, Tinkov founded Tinkoff Credit Services (TCS), a Russia-based branchless bank that provides its customers with online financial and banking services. Through a foreign entity, Tinkov indirectly held the majority of TCS shares. 

In October 2013, TCS held an initial public offering (IPO) on the London Stock Exchange and became a multi-billion dollar, publicly-traded company. As part of going public, Tinkov sold a small portion of his majority shareholder stake for more than US$192 million, and his assets following the IPO had a fair market value of more than US$1.1 billion. Three days after the successful IPO, Tinkov went to the U.S. Embassy in Moscow, Russia, to relinquish his U.S. citizenship. 

As part of his expatriation, Tinkov was required to file a U.S. Initial and Annual Expatriation Statement. This form requires expatriates with a net worth of US$2 million or more to report the constructive sale of their assets worldwide to the IRS as if those assets were sold on the day before expatriation. The taxpayer is then required to report and pay tax on the gain from any such constructive sale.

Bjarne Riis (L) and Oleg Tinkov in happier times. Source: Getty

Tinkov filled out the expatriation form himself falsely, reporting that his net worth was only US$300,000. On Feb. 26, 2014, Tinkov filed a false 2013 individual tax return that falsely reported his income as only US$205,317. In addition, Tinkov did not report any of the gain from the constructive sale of his property worth more than US$1.1 billion, nor did he pay the applicable taxes as required by law. In total, Tinkov caused a tax loss of US$248,525,339.

Under the terms of the plea agreement, Tinkov agrees to pay no less than US$506,828,377, which includes the 2013 taxes, the civil fraud penalty, and statutory interest on that tax, totaling US$448,957,108 as well as tax liabilities for other years that Tinkov acknowledged he owes. Per the terms of the plea agreement, the parties have agreed to recommend a custodial sentence of time served, followed by one year of supervised release, and an additional fine of US$250,000.